The US Bureau of Labor Statistics (BLS) reported Thursday that the US nonfarm payrolls report rose by 119,000 in September. This reading followed a decline of 4,000 (revised from +22,000) recorded in August and beat market expectations of 50,000.
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Other details from the report showed that the unemployment rate rose to 4.4% from 4.3% in this period, while the labor force participation rate rose to 62.4% from 62.3%. Finally, annual wage inflation, measured by the change in average hourly earnings, remained steady at 3.8% year-on-year, compared to market expectations of 3.7%.
“The change in total nonfarm employment for July was revised down by 7,000, from +79,000 to +72,000, and the change for August was revised down by 26,000, from +22,000 to -4,000. With these revisions, employment in July and August combined is 33,000 lower than previously reported,” the BLS noted in its news release.
Market reaction to September non-farm payrolls data
This report does not appear to have a significant impact on the performance of the US dollar against major currencies. At the time of writing, the US Dollar Index was up 0.1% on the day at 100.20.
US dollar price this week
The table below shows the percentage change in the US Dollar (USD) against the major currencies listed this week. The US dollar was the strongest against the Japanese yen.
| US dollars | euro | GBP | JPY | Canadian | Australian dollar | New Zealand dollar | Swiss franc | |
|---|---|---|---|---|---|---|---|---|
| US dollars | 0.87% | 0.68% | 1.92% | 0.24% | 0.76% | 0.98% | 1.54% | |
| euro | -0.87% | -0.07% | 1.42% | -0.61% | -0.13% | 0.13% | 0.68% | |
| GBP | -0.68% | 0.07% | 1.26% | -0.52% | -0.05% | 0.21% | 0.76% | |
| JPY | -1.92% | -1.42% | -1.26% | -1.65% | -1.14% | -0.93% | -0.42% | |
| Canadian | -0.24% | 0.61% | 0.52% | 1.65% | 0.52% | 0.76% | 1.29% | |
| Australian dollar | -0.76% | 0.13% | 0.05% | 1.14% | -0.52% | 0.26% | 0.81% | |
| New Zealand dollar | -0.98% | -0.13% | -0.21% | 0.93% | -0.76% | -0.26% | 0.55% | |
| Swiss franc | -1.54% | -0.68% | -0.76% | 0.42% | -1.29% | -0.81% | -0.55% |
The heat map shows the percentage changes in major currencies versus each other. The base currency is chosen from the left column, while the counter currency is chosen from the top row. For example, if you select USD from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
This section below was published as a preview of September Non-Farm Payrolls data at 05:00 GMT.
- Nonfarm payrolls are expected to rise by 50,000 in September, more than double August’s increase of 22,000.
- The US Bureau of Labor Statistics will publish delayed jobs data on Thursday at 1:30 GMT.
- US employment data is expected to weigh on the US dollar as markets are eagerly awaiting it.
The US Bureau of Labor Statistics (BLS) releases delayed non-farm payrolls (NFP) data for September on Thursday at 1:30 GMT.
US dollar traders are eagerly awaiting the September employment report for clear hints about the health of the labor market and whether the US Federal Reserve will cut interest rates next month.
What can we expect from the upcoming nonfarm payrolls report?
Economists expect nonfarm payrolls to rise by 50,000 in September after increasing by 22,000 in August. The unemployment rate is likely to stabilize at 4.3% during the same period.
Meanwhile, average hourly earnings (AHE), a closely watched measure of wage inflation, are expected to rise 3.7% year-on-year, at the same pace seen in August.
Reviewing the September employment report, TD Securities analysts said: “Job gains will likely rebound to 100K in September, supported by private sector nonfarm payrolls rising by 125K. Government payrolls will likely decline by 25K.”
“We also look for the EU interest rate to move sideways at 4.3% as layoffs remain subdued. The AHE rate will likely moderate to 0.2% m/m (3.6% y/y),” they added.
How will September US non-farm payrolls affect EUR/USD?
The US dollar has halted last week’s decline against major currencies, making an impressive turnaround against major currencies as it prepares to face the non-farm payrolls report.
Renewed US dollar strength pushed EUR/USD below the 1.1600 threshold. Will the downside continue?
A series of recent dovish comments from the Federal Reserve and weak employment data in the US private sector have tempered expectations of another 25 basis point interest rate cut by the central bank in December. Fed policymakers remain increasingly divided on how to balance inflation risks with a cold labor market, prompting them to be cautious about further easing monetary policy.
“Policymakers warned that lower borrowing costs could undermine the fight against inflation,” minutes of the October monetary policy meeting showed on Wednesday.
After the meeting minutes were released, the odds of a December Fed rate cut fell to 33%, according to CME Group’s FedWatch tool, after seeing about 50% before the event and 65% a week ago.
On the economic data front, the Automatic Data Processing Employment Change Report, released on November 5, showed that private payrolls in the United States increased by 42,000 jobs in October, exceeding expectations for an increase of 25,000 jobs.
Meanwhile, data released by Challenger, Gray & Christmas Executive Employment on November 6 showed companies reported a 183.1% monthly increase in layoffs, marking the worst October in more than two decades, according to Reuters.
Additionally, the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers’ Index (PMI) came in at 48.7 in October, below expectations of 49.5. In contrast, the ISM Services PMI rose more than expected to 52.4 last month due to a strong jump in new orders.
Amid the resurgence of economic and labor market concerns in the US, markets are eagerly awaiting the September employment report, albeit an outdated one, to gauge the direction of Fed interest rates in the coming months.
“Although the September nonfarm report will be somewhat dated, it may be the final full employment report the Fed has before its December monetary policy meeting,” Wells Fargo economists said ahead of the report’s release.
A reading below the 50,000 mark and an unexpected increase in the unemployment rate could confirm a recession in the US labor market, reviving bets on an interest rate cut by the Federal Reserve in December. In such a situation, the US dollar may come under intense selling pressure, pushing the EUR/USD pair back towards the 1.1700 level.
Conversely, if the non-farm payrolls report shows impressive job gains and the unemployment rate remains at 4.3% or even declines, EUR/USD could extend the bearish momentum towards levels below 1.1400. Stellar jobs data will rule out bets on a Fed rate cut in December, providing additional support to the US dollar to the upside.
Dhwani Mehta, Senior Asia Analyst at FXStreet, provides a brief technical outlook for the EUR/USD pair:
“The major currency pair closed on Wednesday below the 21-day simple moving average (SMA) at 1.1574, consolidating further declines. Meanwhile, the 14-day relative strength index (RSI) is holding well below the midline on the daily chart, adding credibility to the downside potential.”
“If the downside extends, the next support would be at the November 5 low at 1.1469, below which the 200-day SMA at 1.1395 would be threatened. The line in the sand for buyers lies at the 1.1350 psychological level. On the flip side, any recovery would need to be accepted above the 21-day SMA at 1.1574. We see the next related upside target at around 1.1650, where the 50-day and 100-day simple moving averages intersect, and a further rise could lead to the 1.1700 round level.
Frequently asked questions about the US dollar
The US dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a large number of other countries where it is traded alongside local banknotes. It is the world’s most traded currency, accounting for more than 88% of total global forex trading volume, or an average of $6.6 trillion in transactions per day, according to 2022 data. After World War II, the US dollar took the place of the British pound as the world’s reserve currency. For most of its history, the US dollar was backed by gold, until the Bretton Woods Agreement in 1971 when the gold standard disappeared.
The most important factor affecting the value of the US dollar is monetary policy, which is shaped by the Federal Reserve. The Fed has two missions: achieving price stability (controlling inflation) and promoting full employment. The basic tool for achieving these two goals is adjusting interest rates. When prices rise too quickly and inflation is above the Fed’s 2% target, the Fed will raise interest rates, which helps the value of the US dollar. When the inflation rate falls below 2% or when the unemployment rate is very high, the Fed may cut interest rates, which affects the dollar.
In extreme cases, the Fed could also print more dollars and activate quantitative easing (QE). Quantitative easing is the process by which the Federal Reserve dramatically increases the flow of credit into a stuck financial system. It is a non-standard policy measure used when credit dries up because banks will not lend to each other (due to fear of the counterparty defaulting). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It has been the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. This involves the Fed printing more dollars and using them to buy U.S. government bonds mostly from financial institutions. Quantitative easing usually leads to a weakening of the US dollar.
Quantitative tightening (QT) is the reverse process whereby the Fed stops purchasing bonds from financial institutions and does not reinvest capital from bonds it holds outstanding in new purchases. It is usually positive for the US dollar.
